BOE Bounces Back from COVID in Q2 to Finish Strong First Half

Published September 1, 2020

BOE Technologies, Inc (BOE) issued its 2020 Interim Report this week with financial results for the first half of 2020. Revenues, which had declined in Q1 due to the COVID-19 pandemic, bounced back to set a record in Q2. While much of the flat panel display industry has suffered losses before and during the pandemic, BOE posted profits, and the company has posted a profit in every quarter since Q2 2016.

In Q2 2020, BOE recorded a net profit of CNY 569 million (US$80 million) on revenues of CNY 34.99 billion ($4.9 billion); BOE’s record revenues in Q2 eclipsed the company’s all time high from Q3 2019 by 14%. Revenues were up 33% Q/Q and 18% Y/Y, and revenues for the first half of 2020 were up 11% compared to the same period in 2019. Net profit for the first half was CNY 1.136 billion ($161 million), a 32% decline from 1H 2019, but the largest part of the Y/Y decline was in Q1; Q2 net profit was down 8% Y/Y. BOE noted that Q2 net profit after deducting non-recurring gains and losses was CNY 326 million ($46 million), an increase of 9% Y/Y.

BOE’s gross margin, operating margin, and EBITDA margin all improved from Q1, and have shown steady improvement since Q3 2019, as shown in the chart here.

BOE Income Statement Highlights and Margins, Q2 2018 to Q2 2020

Source: DSCC Quarterly Display Supply Chain Financial Health Report, derived from company releases

In its 2020 Interim Report, BOE highlighted many successful milestones in their business in the first half, including:

  • Navigating the pandemic and seizing market opportunities for telecommuting, remote education and remote shopping.
  • Boosted products to fight the pandemic and improve health, including temperature monitoring and early warning, mobile health products and solutions, a low blue light displays.
  • Optimized its product structure, with increasing sales of 65”+, 8K, oxide notebook PC panels, and flexible AMOLED displays.
  • Flexible AMOLED displays accounted for more than 20% of all shipments in the first half, with smartphone clients including LG, Motorola, Huawei, Oppo and Nubia.
  • Providing aviation display solutions for the new A350 civil aviation cockpit, adopted by about 20 airlines around the world.
  • Outside display, BOE’s smaller IoT and Smart Medical businesses introduced products for cardiovascular disease management, diabetes management, smart first aid, smart health care community and smart public health physical examination.
  • While BOE did not mention this in their press release, we also note that BOE won a SID Display of the Year Award for its 65” UHD BD Cell display.

According to DSCC’s Quarterly OLED Shipment Report, BOE’s OLED smartphone panel shipments reached 16 million in the first half of 2020, an increase of 50% from the corresponding period in 2019. While BOE shipments were constrained by the pandemic in Q1, shipment growth in Q2 accelerated to 92% Y/Y with shipments of 9.7 million. In 1H 2020, BOE surpassed LG Display and now holds the #2 position worldwide in OLED smartphone shipments, trailing only Samsung Display.

BOE also announced in its press release new plans for stock buybacks and employee incentives. BOE’s "Plan on repurchasing part of the company's public shares" states that the company plans to use its own funds to repurchase shares from the public, to the amount of CNY 2 billion ($282 million). The funds represent a small portion of BOE’s cash balance of CNY 58.4 billion ($8.2 billion), and the repurchased shares will be used to implement the company’s equity incentive plan.

BOE’s "Stock options and restricted Stock Incentive Plan in 2020" includes both a stock option incentive plan and two ways of restricted stock incentive plan and will apply to a total of 2974 people in the company, including its subsidiaries. BOE incentives are targeted at the company’s technology backbone and management team, and research and development personnel will account for more than 60% of plan participants. BOE noted that the plan “effectively combines the interests of shareholders, the company and operators” by aligning incentives of the company’s core technical team and management team to the long-term development of the company.

BOE’s incentive plan would allow its employees to benefit from the rising value of the company’s stock. BOE stock, traded on the Shenzhen exchange, closed on Monday, August 31st at CNY 5.50, up 21% since the beginning of the year after a 78% gain in 2019. An investment of CNY 10,000 in BOE stock at the beginning of 2019 would now be worth CNY 21,538.

While many flat panel makers have struggled with oversupply in the industry, and while the once-mighty Korean panel makers are retreating from LCD, BOE seems to be going from strength to strength. The COVID-19 slowdown in Q1 appeared to be little more than a speed bump for BOE, and with LCD TV panel prices increasing in Q3, the company is positioned to have an even stronger second half.

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Written by

Bob O'Brien